EXECUTIVE SUMMARY OF TASKS
The aim of the project is to provide a set of real live case studies for ourselves and for our fellow Operations Management students. The task is to write an account of how the concepts and techniques associated with Capacity Management, Just-In-Time planning and control and Inventory Management are applied in a real situation.
The three tasks were split between the three group members and then we based our study on the following organisations:
* Capacity Management – Barratts Shoe Shop
* Just-In-Time – Rover Group
* Inventory Management – Safeway Stores PLC
Capacity Management was looked at and researched by Amjid Rehman.
Just-In-Time was looked at and researched by Mohammed Zaman.
Inventory Management was looked at and researched by Sukhbir Kaur Bassi.
WHAT IS CAPACITY MANAGEMENT?
* The term Capacity Management can be referred to stock that can be held within different facilities.
* For example stock can be held within a building, a container and other spaces i.e. a football ground would have a capacity of 25,000 seats.
* Another example of “capacity holders” includes warehouse, storage yards and waiting room; they need to be able to hold a number of stocks, products and people.
* The determination of capacity will be affected by the way an organisation decides to meet the demand.
* How well the organisation can produce or provide the goods and services demanded.
* If a customer demands 1000 coke cans, the organisation capacity management should match the size of the customers demand.
* The organisation has to have the stock level to meet the demand.
* Capacity is used to describe stocks and flows
* Stock is measured in terms of tonnes, litres and other units.
* Flows describe the movement of stock over a certain period of time. Like for example, we would get 8 litres of water from the tap per minute.
CAPACITY MANAGEMENT AT BARRATTS SHOE SHOP
* The stock room for Barratts shoe shop must have the capacity to manage with the daily deliveries that arrive.
* Barratts shoe shop can only provide goods and services to meet customer demands only if stock is available.
* The shoes stock is held in a large stock room in number order so that it is easy to find the product required.
* Customers can demand any type of shoe when coming into Barratts and it is the company’s responsibility to have the product required in stock, at a suitable stock level to meet customer demand.
* Stock can be measured in pairs or in style number order.
* The movement of stock turnover will depend on the daily shop targets and the percentage of people purchasing shoes, these may differ according to fashions and styles that may be “in fashion” at a certain time.
* For example a sales assistant is doing a six-hour shift at Barratts and his/her target is ï¿½600, which they have to reach at the end of the day. They would roughly have to sell ï¿½100 worth of shoes per hour to meet targets.
FORECASTING CAPACITY MANAGEMENT AT BARRATTS
* The purpose of forecasting is to reduce uncertainty
* Demands for the products of an organisation as assessed by means of forecast, which involves the organisation sales and expected market share.
* To satisfy the forecast demand the organisation develops its products and/or services, which conclude in high demand.
* Products will be promoted in a more effective way, this will be noticed in changes in the organisations market share.
* Forecasts are often classified in three horizons; long-term; medium-term and short-term.
* Long-term – involves broad and wide issues.
* Medium-term/Short-term – involves more narrow issues.
FORECASTING TECHNIQUES USED AT BARRATTS
Quantitative forecasting uses numerical technique to analyse historical data.
Time series analysis is a technique that uses quantitative forecasting
Time Series Analysis
Time series analysis is a forecasting technique used by Barratts and it is based on simple assumptions that are forecasted for the future depending upon past data and events. E.g. putting together data about past sales could produce the “sell more sandals in the summer than boots” or “sell more boots in the winter than summer”.
At Barratts Shoe Shop the time series analysis is broken down, in other words decomposition splits the data information about the four seasonal variations known as components each of which can be forecasted. These four components are as follows:
1. TREND – is the basic change in data as time goes on, i.e. demand is doubling every five years.
2. SEASONALITY – refers to the functionality of repeating activities on an hourly, daily, weekly or monthly basis. Within the year there is always a seasonal event, i.e. Christmas: during which demand for certain products increase. Seasonality also occurs internally of an organisation when they are paying out wages/salaries on a weekly or monthly basis.
3. CYCLES – occur over periods of several years these are similar to seasonal factors.
4. RANDOM VARIATION – are trends, seasonality and cycles that are treated as the reason behind a random event.
WHAT IS JUST-IN-TIME?
Just-In-Time originated in Japan in the 1960’s. The Japanese car giant Toyota worked hard in developing a wide range or new approaches to manufacturing.
Just-In-Time (JIT) is a system of stock control that has become popular in UK firms over the last couple of decades. The basis of the system is that the costs of holding stock should be unacceptable to a firm, and so the level of stock held by the firm ought to be as small as possible. In other words JIT is the attempt to operate with a zero buffer stock; however this will only work if a system is developed so that the costs and risks of running out of stock are avoided by the firm.
At the operational level JIT aims to cut the high stocks which hinder the performance of many companies. The advantages of using JIT are:
* Improves the firm’s liquidity;
* The cost of holding stocks are reduced;
* Storage space can be converted to a mere production use;
* Stock wastage and stock rotation become lesser issues for management;
* Response times to changing demands are speeded up as new components can be ordered instantly.
Total Quality Control
Without high levels of quality there is no JIT. As more and more waste is taken out of production, the need for improved quality in design, supply and processing sharply increases. If quality performance is poor the whole of the JIT process adversely affected and therefore improvements are unrealised. Problems are created if quality is poor, with high levels of work in progress and stock, companies may sometimes be unaware of problems that they are facing.
Cost of quality will include rework, scrap, downtime, changes in production schedules, engineering changes, design changes, stock write off’s and management time.
WHAT IS JUST-IN-TIME?
Whilst the notion of JIT stock control has many attractive features, it is unclear to what extent such a system could realistically operate in the UK. Establishing a JIT system is not something that can or should be developed overnight. The system relied on constant flow of deliveries arriving at the right time. This implies that that the country’s roads, rail and communication must be capable of dealing with a much greater volume of industrial traffic than it has been designed for. An increasingly common feature of UK life, where JIT is used, is of massive congestion on roads around industrial centres, resulting in just-in-time often becoming just-too-late.
JUST-IN-TIME AT ROVER
The Rover group is Britain’s largest motor manufacturing producing approximately half a million vehicles a year. The group designs, manufacturers and markets Rover cars.
A major transformation took place in 1989 when Rover first implemented Just-In-Time (JIT). The Rover group invested in manufacturing technology, in order to achieve a segment of their broader objective, which is to achieve product excellence at target cost and on time. The group have invested in many manufacturing approaches with JIT being one of them.
JIT is based on the prime of minimal inventory control and involves a close relationship between the Rover group and its suppliers. The JIT approach comes into force when the Rover products are ready to be market launched. The following takes place within the company:
* When the product is nearly ready for production, preparation for manufacturing begins;
* The aim is to ensure that the vehicles will be manufactured to the set company quality targets;
* Production line operatives go through extensive training and hands-on practice, and prototype vehicles are built in small batches using actual production tools and facilities;
* The logistics of this task are formidable for an all-new product; thousands of parts have to be delivered to the plant with split second timing to meet Rover groups “Just-In-Time” standards;
* When everything reaches target standard levels, production rates are increased to achieve the line rate required. By the time the product is launched all dealers have enough to fulfil demand and production is running up to speed.
The JIT approach of “lean manufacturing philosophy” is fundamental to Rover group. By achieving the deliver of the right products in the right place at the right time, allows flexible manufacturing. This in return enables the Rover group to be more responsive and alert of customer demand.
WHAT IS INVENTORY MANAGEMENT?
Inventory Management is the practice of planning, directing and controlling inventory so that it contributes to the business’ profitability. Inventory management can help business be more profitable by lowering their cost of goods sold and/or by increasing sales
The ability to deliver the right product to the right place at the right time is the core of any business. Companies must ensure that they have enough of the right product in stock whilst avoiding stock outs and overstocks is a daily challenge.
The functions of inventory management are:
* To meet anticipated demand;
* To smooth production requirements;
* To decouple components of the production-distribution;
* To protect against stock-outs;
* To take advantage of order cycles;
* To help hedge against price increases or to take advantage of quantity discounts;
* To permit operations.
In summary, inventory management is a key factor in successful operations management, it……
* Links vendors to production and distribution functions;
* Maintains stock levels to support production efficiency;
* Supports product transportation economies;
* Provides products to support marketing and sales to customers;
* Maintains service levels to support customer demands.
INVENTORY MANAGEMENT AT SAFEWAY PLC
Safeway is one of the largest supermarket chains in the UK, with a turnover of over ï¿½9 Billion, over 470 stores and 80,000 employees.
The supply chain within food retailing is extremely large and complex, with many billions of transactions and product movements being planned and executed every year. Growing customer expectations for services and choices that have low transaction values, means correct decisions in optimising that supply chain must be made and are crucial to the continued profitability of the company.
* Traditionally, there has been a significant time lag between an event in a store and the ability of the central supply chain system and supplier processes to react. Having timely and useable information available to manage that supply chain is vital. That information must be gathered at source and presented to the people that need it, where they need it – that is, out there on the shop floor, in the warehouse, or on the manufacturing line.
* The Supplier Information System (SIS) was developed and deployed for stock control. The objective of the system was to keep track, in real time, of the 25,000 lines in the average retail store and provide that accurate inventory back to the centre for accurate and timely buying decisions.
* Scanners are used to capture any movement of stock in the store and to pump that information back to a large database on a central mainframe.
* The real benefit to the store manager is the information that the system can give back to him via his hand-held data management device, such as information about delivery arrivals, alerts about imminent stock run-out and prompts to fill shelves at the right time. The system can remind him to count the same stock in different locations; it can monitor what the customers are doing and predict where shelf stock shortages are about to occur. There’s no longer any need to walk up and down to check stock levels – labour can be focused where it is needed.
In summary, the main benefit areas are:
* Improved sales through product availability.
* Fewer stock outs during the day – the system will prompt that stock is available in the back storeroom.
* Refocusing of retail labour, from low value-added tasks, such as counting and stock management, to more customer service based roles.
The three methods of operations management that were researched in this project will exist in just about every organisation in one form or another. Planning and control is very important and a critical task for every organisation. However, the way the tasks are carried out will differ depending on the type of organisation that is looked at.
For example, a greengrocers will have a small turnover compared to a supermarket therefore it will be necessary for the supermarket to keep its stock levels to a suitable level to meet demand, however, if the greengrocers bought as much stock as a supermarket the fruit and vegetables will only go to waste because of the slow moving stock.
Such planning and control systems add to the ability of managers to analyse stock movements and make it possible for more accurate decisions to be made on what stock to hold and in what quantities.
Just-In-Time systems have been developed so that the costs and the risks of running out of stock are avoided by the firm. Even though this system has become popular in the UK firms over the last couple of decades, there are always downsides to adopting such a system. As the organisations reputation is vulnerably placed in the hands of the supplier, reliability is one commitment that suppliers must make to that organisation as a break in supply would cause immediate problems for that organisation especially if it held no stock whatsoever.
It is not necessary that all three components must exist in every organisation. The method adopted by a firm will depend upon the nature of that firm. If stock turnover if high then it may be necessary to have a complete mixture of all components, however, if it is a local corner shop it might not be as important.
Appendices 1 – MEETING LOG
Tuesday 22nd October, 2002
Location: Lecture Room
Participants: Sukhbir, Amjid and Mohammed
Time: 15:45 – 16:20
Notes: A group was formed and general introduction about one another was made. The three topics were discussed. Mohammed and Amjid had done this project before. Decided to use their project and improve on it.
Tuesday 29th October, 2002
Location: Lecture Room
Participants: Sukhbir, Amjid and Mohammed
Time: 16:00 – 17:00
Notes: Reviewed Amjid and Mohammed’s previous project and discussed where there was room for improvement. Inventory Management was missing so Sukhbir was placed with the task to identify an organisation that used inventory management.
Monday 11th November, 2002
Location: discussion via e-mail
Participant: Sukhbir and Amjid
Notes: Sukhbir had chosen Safeway PLC Stores to discuss inventory management. E-mailed what she had found to Amjid so that he could see if it was relevant and to discuss how to write-up the report on Safeway PLC.
Sunday 01st December, 2002
Participant: Amjid and Mohammed
Notes: The JIT and Capacity Management components of the project were typed up and improvements were made.
Tuesday 17th December, 2002
Location: Lecture Room
Participant: Sukhbir, Amjid and Mohammed
Time: 14:00 – 14:15
Notes: During 1st December and 17th December there was lack of communication, we had an unfinished report and all members of the group were to blame. Amjid and Mohammed handed over their work to Sukhbir, who was going to compile it together alongside her work.
Thursday 19th December, 2002
Location: Harrison Learning Centre
Participants: Sukhbir, Amjid and Mohammed
Time 14:35 – 16:30
Notes: The report was finalised all necessary amendments were made by group members.
Appendices 2 – PROJECT MANAGEMENT USING CRITICAL PATH ANALYSIS
A – Form Group and discuss the tasks that have been set in the assignment
B – Review previous project and make room for improvement.
C – Make a Critical Path Analysis planning tool chart
D – Research Inventory Management
E – Type up Capacity Management and Just-In-Time research
F – Draft a section for Inventory Management
G – Review three sections and make improvements
H – Finalise the project
A B D F G
This project was a valuable addition to the material of the course so far succeeded. The analysis of three business conducted at the beginning of the semester was the main ingredient for the success of the project. This analysis consisted of looking at the business processes, control and planning as well as the interaction with external entities. The project gave us insight into some of the real world decisions and how textbook theory relates to real world businesses.
This project also helped us learn how to work with people with such varying opinions on how the project should be conducted (a planning and control method used within it self). The compromises made by each side ultimately benefited the project. The members of the group were respectful to one another and listened to each idea with an open mind, however attendance and lack of communication was not maintained thoroughly as planned at the start.
JOHNSTON, R, CHAMBERS, S, HARLAND, C, HARRISON, A, SLACK, N. (1997) Cases in Operations Management. 2nd Ed., Great Britain: Pearson Educational Limited.
LINES, D, MARCOUSï¿½, I, AND MARTIN, B.,(1996). The Complete A-Z Business Studies Handbook: Hodder ; Stoughton Educational. Great Britain.
MARCOUSï¿½, I. et al. (2000) Business Studies. 2nd Ed.,
London: Hodder ; Stoughton Educational.
MODEN, Y. (1994) Toyota Production System: An Integrated approach to Just-In-Time. 2nd Ed., London: Chapman ; Hall.